A term sheet summarizes the core deal points — how much is being invested, at what valuation, what type of shares the investor gets, board seat and information rights, liquidation preference, anti-dilution protection, and pro-rata rights for future rounds — in a few pages, before lawyers draft the full, legally binding definitive agreements. Most of a term sheet is explicitly non-binding, meaning either side can still walk away, except for a few sections that are binding by design, like confidentiality and exclusivity (also called a “no-shop” clause, which blocks the founder from shopping the deal to other investors for a set period).

Signing a term sheet is a strong signal of serious intent and usually kicks off the due diligence period, but it is not the same as money actually landing in the company’s bank account. For founders, the headline valuation number is often the least important part to negotiate hard on — terms like liquidation preference and board control tend to matter far more to the eventual outcome than a slightly higher or lower price.

A common beginner mistake is treating the term sheet as a formality since it “looks simple” — first-time founders should still have a lawyer review it carefully, since standard-looking clauses can hide meaningfully founder-unfriendly terms.

🇵🇭 Philippine Example

Philippine funding rounds — whether from an angel network, a VC fund, or a corporate investor — generally follow this same term-sheet-then-definitive-agreement sequence. Once a deal closes, the issuance of new shares typically also requires updating the company's Articles of Incorporation or share records with the Securities and Exchange Commission, an extra local compliance step layered on top of the usual term sheet and closing documents.

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